Maryland Takes a Big Risk with Net Metering

On May 4, 2010, Maryland Governor Martin O’Malley signed a net metering bill (HB 801) into law.  While this bill was lauded by a few local solar advocates, it is yet-to-be determined if this will provide a benefit or loss to net metering customers.

In the 2009 edition of Freeing the Grid, Maryland scored an ‘A’ for net metering. The main thing it was lacking was a provision that provided net metering customers with year-end compensation for any excess energy they accumulated.  Instead, any annual net excess generation (NEG) was gifted to the utilities.  To correct for this, HB 801 provides that net metering customers should get compensated for the generation component of their credits at the end of the year.  Fair enough, as most states allow for this through avoided cost payments.

The bill goes a step further, however, to mandate that all net metering credits should be monetized at the generation rate of energy and rolled over to the next month.  But because generation does not include other charges like transmission and distribution, this would effectively mean a downgrade from retail credits to wholesale credits.  The bill stipulates that net metering credits are to be tied to the “prevailing market price of energy applicable to the electric company in the PJM interconnection energy market,” which sounds to be the Locational Marginal Price (LMP), a wholesale energy rate.   This might be profitable for solar customers during a few peak hours of the day (as long as they weren’t concurrently using the energy), but for many more hours of the day, solar generation would most likely be credited at a much lower rate than retail.  It is also significant that 29% or 2/7 of the time (e.g. weekends) net excess generation will be credited at rates far lower than even average wholesale rates. Weekends are “off-peak” but a rooftop PV system is likely not aware of this and generates as if it were a peak day. This could be especially detrimental for generators that do not necessarily produce energy during peak hours (i.e. wind).

As best practices indicate, and as IREC has specified in its model net metering policy, an indefinite rollover provision could have easily fixed their year-end reconciliation issue.  In fact, Maryland’s eastwardly neighbor Delaware just did this.

In short, it would take an extensive financial analysis to determine whether this would be a net gain for solar customers in Maryland. Unfortunately it has great potential to translate into a substantial loss for net metering customers, particularly for wind energy generators.


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